The economic crisis is deepening. The second Modi government takes office amid a clear economic slowdown. The new Finance Minister, Nirmala Sitharaman, is facing an under-performing economy. The unemployment data, controversially suppressed by the Union government so far, showed that joblessness was at a 45-year high of 6.1% in 2017-18. These numbers highlight the challenges ahead for Ms. Sitharaman as she sits down to draft the Budget for 2019-20, to be presented on July 5.
The good news is that inflation is undershooting the target and oil prices are on the retreat again. But the rural economy remains in distress. Overall economic growth in the first quarter of this fiscal is likely to remain subdued, and any improvement is unlikely until the late second quarter or the early third. There are not too many options before the new Finance Minister.
She has to boost consumption and take measures to boost private investment. A rate cut by the Reserve Bank of India, widely expected this week, would certainly help boost sentiment. But it is the Budget that will really set the tone for the economy.
The easy part was winning the election by appealing to Hindu Nationalist sentiment and increasing tensions with Pakistan over the Pulwama incident. Now however with the economy slowing and unemployment rising, Modi will have to take the needed steps to introduce market labor and land reforms. As a result FDI is declining. There is little difference between NDA and UPA in this regard.
The economy as a whole is terribly saddled due to the NPAs that wiped nearly $200 billion from banks’ capital, bottle necking further flow of credit to industries. Government must immediately bring back the Land Acquisition Bill to remove bottlenecks faced by huge investors & making India more attractive for investment in order to fill the capital deficiency. Easing of labor laws is a must to make sure protection laws don’t hinder & push back investors. We need to roll out red carpet to them to generate jobs.
Some people, when reporting about India’s problems, always search for negative news about India and highlight it. It is not just India but the whole world which seems to be going through an economic slowdown. The Modi government does show promise of helping India overcome this slowdown.
National Economic development is not a magic-wand. Action needs years of Planning, Resources conversions, Education, Management/Administration to steer and maneuver the country to the position of top economic power.
Though some external factors do influence the economy in a liberalised world, our nation has great potential to tackle the internal economic issues. Fortunately, the nation is also rich in professionals in the field. The finance minister needs to take advice from the economists too & take the most optimum steps to rebuild the economy.
Lastly, the expected rate-cut by Reserve Bank of India should not reduce the interest rates on the deposits of Senior Citizens in the country.